The beta of a diversified portfolio is equal to the of the


1. Which one of the following will decrease the after-tax cost of debt for a firm?

an increase in tax rates

changing the firm's bond rating from A to B

an increase in the risk-free rate of return

an increase in the risk level of the firm

2. The beta of a diversified portfolio is equal to the _____ of the betas of the individual securities that comprise the portfolio.

arithmetic average

summation

weighted average

geometric average

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Financial Management: The beta of a diversified portfolio is equal to the of the
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